The UK auto market is in substantive shift as the echoes of global supply constraints and the switch to electric vehicles have converged to create an imbalance between what many buyers want and what is on offer.
In a trading update today from Vertu Motors, the owner of the Macklin chain of car dealerships in Scotland said it achieved like-for-like growth in new car sales during the six months to the end of August as supply constraints that took an estimated 42 million vehicles out of production during the past few years have continued to ease. This has been particularly evident in the recent influx of battery-powered EVs that now seem to be outstripping the public’s appetite for electric options.
“Recent increased supply of new electric vehicles appears to be exceeding retail demand, creating an imbalance in pipeline inventory coming into the key plate change month of September,” said Vertu, which operates a network of 189 sales and aftersales outlets throughout the UK. “Manufacturers are reacting to this through the offer of discounted prices and supported finance rates to stimulate retail demand.”
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However, the impact of that discounting push could be short-lived as new “rules of origin” that are part of the Brexit trade deal get set to take effect in January.
The rules of origin will impose tariffs on vehicles made in the UK for export to European markets, which has led to warnings from Vauxhall parent company Stellantis that it may be unable to continue the production of EVs in the UK. Battery-powered vehicles imported into the UK from the European manufacturing plants of Jaguar, Audi, Volkswagen and Skoda would also face 10% tariffs that would add up to £5,000 to price of each vehicle, with experts warning that much of this would likely be passed on to consumers.
Rishi Sunak’s government wants to suspend the looming rules, which are designed to encourage the development of a car battery industry on both sides of the Channel, but Brussels has so far resisted. The outcome remains uncertain.
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Meanwhile, the surge in new EVs is doing nothing to alleviate the shortage of quality used vehicles in the UK, with Vertu reporting a 6.3% reduction in transactions in this category in the first half of the year. Autotrader has estimated there are 27% fewer sub-five-year-old cars in the UK compared to 2019, which will keep used car prices at their currently elevated levels for the foreseeable future.
